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Urbanization Without Growth in Historical Perspective☆

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Urbanization Without Growth in Historical Perspective☆ Available online at www.sciencedirect.com ScienceDirect Explorations in Economic History 58 (2015) 1–21 www.elsevier.com/locate/eeh Urbanization without growth in historical perspective☆ Remi Jedwaba,⁎, Dietrich Vollrathb a Department of Economics, George Washington University, 2115 G Street, NW, Washington, DC 20052, USA b Department of Economics, University of Houston, 201C McElhinney Hall, Houston, TX 77204, USA Available online 11 September 2015 Abstract The world is becoming more and more urbanized at every income level, and there has been a dramatic increase in the number of mega-cities in the developing world. This has led scholars to believe that development and urbanization are not always correlated, either across space or over time. In this paper, we use historical data at both the country level and city level over the five centuries between 1500–2010 to revisit the topic of “urbanization without growth” (Fay and Opal, 2000). In particular, we first establish that, although urbanization and income remain highly correlated within any given year, urbanization is 25–30 percentage points higher in 2010 than in 1500 at every level of income per capita. Second, while historically this shift in urbanization rates was more noticeable at the upper tail of the income distribution, i.e. for richer countries, it is now particularly visible at the lower tail, i.e. for poorer countries. Third, these patterns suggest that different factors may have explained the shift in different periods of time. We use the discussion of these factors as an opportunity to provide a survey of the literature and summarize our knowledge of what drives the urbanization process over time. © 2015 Elsevier Inc. All rights reserved. JEL classification: N9; R1; O1 Keywords: Urbanization without growth; Economic development; Megacities; Urban poverty; Urbanization Contents 1. Introduction ....................................................... 2 2. Urbanization and development in the data ........................................ 3 2.1. Urbanization and GDP per capita ......................................... 3 2.2. Measurement issues and robustness checks .................................... 5 2.2.1. Earlier years ............................................... 5 2.2.2. Later years ................................................ 6 2.2.3. Comparisons across time ......................................... 7 ☆ We would like to thank Hans-Joachim Voth for encouraging us to write this paper, and for his valuable comments. We are also grateful for seminar audiences at George Washington and George Mason for very helpful comments. We thank the Institute for International Economic Policy at George Washington University for financial assistance. ⁎ Corresponding author. E-mail addresses: [email protected] (R. Jedwab), [email protected] (D. Vollrath). http://dx.doi.org/10.1016/j.eeh.2015.09.002 0014-4983/© 2015 Elsevier Inc. All rights reserved. 2 R. Jedwab, D. Vollrath / Explorations in Economic History 58 (2015) 1–21 2.3. The evolution of mega-cities ............................................7 2.4. Summary of empirical analysis.......................................... 13 3. Urbanization and development in theory ........................................ 13 3.1. Conceptual framework .............................................. 13 3.2. Urbanization with growth ............................................ 14 3.2.1. Agricultural revolutions ......................................... 14 3.2.2. Industrial revolutions .......................................... 14 3.2.3. Resource revolutions .......................................... 14 3.2.4. Agglomeration effects.......................................... 15 3.3. Urbanization without growth........................................... 16 3.3.1. Urban technologies ........................................... 16 3.3.2. Urban amenities and preferences .................................... 16 3.3.3. Urban bias ............................................... 16 3.3.4. Rural poverty .............................................. 17 3.3.5. Internal urban growth .......................................... 17 4. Discussion and conclusion ............................................... 18 Appendix A. Data Sources.................................................. 18 Appendix B. Supplementary data .............................................. 19 References .......................................................... 19 1. Introduction In this paper we examine the relationship of urbanization and development levels from 1500 to Urbanization is often considered a hallmark of 2010, with the goal of discovering whether in fact this economic development (Kuznets, 1968; Bairoch, 1988). relationship has changed appreciably in the late 20th Urbanization rates and city sizes have often been used as century. We first establish that the world is becoming empirical proxies for the level of income per capita (De et more urbanized at every level of income per capita over al., 1993; Acemoglu et al., 2002; Dittmar, 2011). At a time, with the shift on the order of 25–30 percentage global level they have trended upward together from the points for all countries. However, this occurred in Neolithic Revolution, when an appreciable agricultural different periods of time for different parts of the income surplus first allowed for towns and cities to form, to the distribution. From 1500 until the mid-20th century we current day when roughly half of all people live in urban find that urbanization rates rose dramatically for the areas (United Nations, 2014). richest countries, but remained roughly constant (i.e. Recently Fay and Opal (2000) documented what they close to zero) for countries at the lowest levels of income called urbanization without growth in developing coun- per capita. However, from the mid-20th century until tries of the late 20th century. In a similar vein, Glaeser today, urbanization has occurred primarily among the (2013) shows that there is “poor country urbanization” at poorest countries in the income distribution. In this sense, the bottom of the income distribution, and Jedwab and urbanization without growth is not unique to developing Vollrath (2015) document that mega-cities are increas- countries in the 20th century. Rather, it appears to have ingly located in poorer countries. These papers suggest been occurring for several centuries. the possibility that something fundamental has changed A consequence of this difference in the timing of in the relationship of urbanization and development in the urbanization is that the location of “mega-cities”–the late 20th century compared to prior experience.1 largest urban agglomerations in a given time period – has changed demonstrably over time. From 1500 to the mid-20th century the largest mega-cities in the world 1 The theme of urbanization without growth is not entirely new to economics and urban studies. (Hoselitz, 1953)explainedthaturbanization, tended to be in countries that were relatively rich and industrialization, and economic development are not always correlated. developing rapidly (e.g. London and New York). From (Hoselitz, 1955)suggestedthatmanycitiesinthedevelopingworldwere that point until today increased urbanization rates, “parasitic” as opposed to “generative”.Similarly,(Bairoch, 1988)discusses combined with large population bases, mean that the the processes of “over-” or “hyper-” urbanization in the process of largest mega-cities now tend to be located in poor development. Lastly, (Davis, 2007)studythedramaticexpansionofslums and the rise of an “informal urban proletariat” in the developing world. countries (e.g. Dhaka and Lagos). We document below Davis thus also argues that urbanization has been disconnected from how the location of mega-cities has changed over time economic growth. along with the urbanization rate. R. Jedwab, D. Vollrath / Explorations in Economic History 58 (2015) 1–21 3 Last, we review the literature on urbanization and 2. Urbanization and development in the data development for explanations of why this disconnect in the urbanization process occurred, and why it occurred 2.1. Urbanization and GDP per capita starting in the mid-20th century. We note that there are both positive and negative types of urbanization without Our first crude examination of the urbanization/ growth. Technologies such as clean water, sewers, public development relationship is in Fig. 1. This plots transportation and multi-story buildings increase the urbanization rates against log GDP per capita for a total relative value of living in urban areas and generate larger of 1319 observations that we collect. Data sources are cities, even if they may have no direct impact on available in the Appendix A. The positive correlation is productivity or output per worker. These positive forces clear and quite strong. Log GDP per capita explains about seem to predominate in the earlier era leading up to the two-thirds of the variation in urbanization rates. The slope mid-20th century. On the other hand, urban bias in estimate indicates that tripling GDP per capita (equivalent policies or rural poverty represents negative urbanization to raising log GDP per capita by 1) raises the urbanization that appears to lower welfare even if it has no immediate rate by about 20 percentage points. This represents an impact on output per worker. While there certainly may equilibrium relationship, and not a causal one. Economic be positive forces driving urbanization in the late 20th development both
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